No B.S Friday: In the future, this will probably be the most important ingredient of success.
One of the thing I like about property is that you can’t day-trade it.
Even the shortest of investment horizons in property tends to be fairly long. Maybe you might flip a property in 12 weeks or something.
That would be quick, but even then you’re not relying on the market for growth – you’re making it yourself.
I was talking to a friend the other day who had taken a bit of a hit in the recent crypto shake out.
Actually I probably shouldn’t say crypto. It’s more a Bitcoin thing. Some of my alt-coins are actually up over the past couple of weeks.
But he was reflecting how hard it was to keep his emotions out of it.
When the market’s pumping he really begins to believe the good times will last forever. He gets FOMO.
When the market’s tanking, he feels certain that it will just keep on crashing. He get FOGO – fear of getting out.
Hey buys in too high, he sells out too low.
Now, I don’t know if you’re new to this concept, but the way to make money investing is to buy low, sell high. Not the other way round.
And my mate knows this. He knows that markets are driven by emotion. He knows that this is exactly why there can be so much opportunity for investors who can keep their heads.
But it doesn’t help him.
He knows he can’t run with the herd, but in the heat of the moment, he can see his emotions get the better of him, and he’s right there in the herd, driving it along.
And this is the funny thing about being human. We know that being ‘emotional’ as an investor is a recipe for disaster. But that still doesn’t – it can’t – stop us from getting emotional ourselves.
I think the only hope we have is to recognise that we’re emotional sacks of irrational meat, and just try to do the best we can with that reality.
I like what Tyler Cohen says about this. As much as “emotional sacks of irrational meat” is a killer phrase, Cohen probably puts it better:
“I think the future belongs to people who are what I call meta-rational. That is, people who realize their own limitations.
So not all the skills that you think are so valuable actually will matter in the future. Don’t just feel good about yourself, but think critically, what am I actually good at that will complement emerging sectors and emerging technologies. The world of the future, even the present will be a world of algorithms. … People who think they can beat the algorithms will make a lot more mistakes. …
So know when you should defer. It’s easier than ever before to get advice from other people. When can you trust the advice of others? Having good judgment there is becoming more important than just being the smartest person or having the highest IQ.”
“meta-rational”. I like that.
It’s not about being smart. It’s about being smart about how stupid you are – it’s about being aware that you have all sorts of biases, and that in an increasingly sophisticated world, those biases are going to hold you back.
It’s about being aware of it and holding yourself to account. Even developing systems to help you deal with it.
I agree that this will be one of the defining features of success going forward.
The future belongs to the meta-rational.
JG.